India to Overtake USA as the largest Global DTH Market in 2012

India’s pay-TV industry will continue to have a sizable impact on consumption and investment trends in Asia Pacific, according to a new research report called Asia Pacific Pay-TV & Broadband Markets 2011 published by leading industry analysts Media Partners Asia (MPA).


According to MPA, four highlights of the report include the fact that India’s fast growing, six-player direct-to-home satellite (DTH) sector will overtake the United States next year as the largest in the world with an active subscriber base of close to 42 million versus a projected customer base of 35 million in the USA where two dominant and profitable groups compete in the market.


Secondly, the local cable and satellite advertising market will surpass China by 2017, to lead the Asia Pacific region with US$5.6 billion in net revenues.


Thirdly, three Indian companies – Sun TV Zee and Star India- dominate the top 10 profit rankings for Asian pay-TV broadcasters but distribution platforms are yet to feature in the operator mix due to limited profitability.


Lastly, margins across the India pay-TV industry value chain are amongst the lowest of any emerging market due to cost inflation, competitive pressures, regulation and a reliance on legacy analog cable networks. Margin pressure will remain in the medium term but improve in the long-term as operating leverage improves.


Commenting on the findings of the report, MPA executive director Vivek Couto said, India remains Asia’s largest pay-TV market opportunity in which revenue, cost and capital expenditures are growing at an alarming rate due to various dynamics, including macro growth, competition and digitization. Encouragingly, revenue growth is trending at optimum levels due to a strong economy, a buoyant advertising market and the rapid growth of DTH. Yet, such is the extent of competition, cost and fragmentation that profit margins remain low, even for market leaders. We expect margins and value chain economics will improve in the long term, through digitization of cable networks, rising subscriber scale, improved cost control and strong advertising growth. Pricing power for pay-TV services will still be modest however, as ARPU growth will remain under pressure due to competitive and regulatory dynamics”.


Some of the key forecasts of the report include:


Approval from the Ministry of Information & Broadcasting to digitize cable networks across India by December 2014 is encouraging. This should help cable operators slowly close the wide gap with DTH in execution, innovation and capitalization. The government is also expected to harmonize FDI levels in pay-TV at 74 percent in June 2011. This may also help accelerate capital infusion into cable.


Digital cable subs will reach ~20 million by 2015 and ~35 million by 2020. MSOs will leverage upgraded networks to ramp up broadband growth from a low base (reaching three million subs by 2015 and 6.5 million by 2020), focusing on high-speeds at competitive prices. The growth of mobile broadband will be exponential, anchored to 3G and broadband wireless access, reaching 78 million users by 2015 and 126 million users by 2020.


Total pay-TV subscribers are expected to reach 166 million by 2015 and 190 million by 2020.  MPA projections measure pay-TV penetration after accounting for households that opt for multiple services (i.e. cable and DTH). On this basis, pay-TV penetration will grow from 79 percent to 88 percent between 2010 and 2020. DTH will be the main driver of subscriber growth, digital penetration and HD growth.


The active DTH  subscriber base (i.e. paying customers only) will grow from 23 million in 2010 to 64 million by 2015 and 83 million by 2020, implying a 44 percent share of the overall market by 2020. The main challenges are transponder capacity, high churn, subscriber acquisition costs and limited pricing power but MPA sees four out of six DTH players generating free cash flow after 2015, driven by scale and cost control.

The pay-TV advertising market is expected to grow at an average annual rate of 17 percent over 2010-2015, driven by the economy, the positive impact of category competition and rate increases implemented by TV networks. Pay-TV subscription revenues will grow at a 12 percent CAGR over the same period to reach US$8.4 billion by 2015, driven by DTH and digitization of cable networks.


By Team
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